Job losses, store closures to follow #Tim Hortons merger with #Burger King
by The Daily Lede
The merger of Canadian coffee icon Tim Hortons with fast food hamburger chain Burger King by private Brazilian equity firm 3G Capital is guaranteed to produce more heartache than celebration in the coming weeks and months.
3G Capital, a Brazilian multi-billion dollar, global investment firm founded by Jorge Paulo Lemann, a Swiss-Brazilian banker, is known for it’s results-driven, hard-nosed, cost-cutting strategies. The company, best known for it’s takeover of Burger King in 2010 is also behind the acquisitions of two more American consumer Icons–Heinz Ketchup and Anheuser-Busch. Together, the companies share a combined value of more than $187 billion—larger than that of Citigroup.
The acquisition of those three companies by 3G Capital saw the loss of jobs, the end to many executive perks, the implementation of severe cost-cutting measures to office staff, and the closure of plants. If 3G Capital’s track record is of any indication, then the takeover of Canada’s Tim Hortons coffee chain is nothing to be celebrated.
Former colleagues say Lemann is a frugal executive who prizes simplicity. Friends say that he is not one to indulge in expensive sports cars or collectible art. Lemann is known to dress casually and favors a Passat over a Porsche.
Lemann’s largest transaction, the $52 billion takeover of St Louis based Anheuser-Busch in 2008 by InBev NV, saw the loss of 1400 jobs and the elimination of perks such as business-class flights, Blackberrys and free cases of beer within weeks of the deal being solidified. Even CEO Carlos Alves de Brito was asked to fly economy class.
After it’s acquisition of Burger King in October of 2010 for $4.1 billion, 3G quickly began to streamline by eliminating jobs. By years end the number of employees of the Burger conglomerate dropped to 35,000 from nearly 39,000, according to the companies securities filings.
In one day alone in December of 2010, Burger King fired 413 people from it’s corporate head office in Miami, while at the same time, seeing it’s earnings before interest and taxes rise %14.
H J Heinz
In February of 2013, 3G Capital together with Warren Buffet’s Berkshire Hathaway, purchased H J Heinz for $28 billion. Since then the company has seen the loss of nearly 3,400 jobs and closure of 3 US and 2 European plants in order to boost profits. To add insult to injury, former Heinz CEO, William Johnson, received $110.5 million for his final eight months of employment with the company and the current head, Bernardo Hees, who joined the firm in June 2013, would be compensated $9.2 million.
In addition to job losses, 3G also implemented a series of strict cost-cutting measures.
In a memo obtained by Bloomberg News, 3G outlined some of the new company policies:
“limit printing to 200 pages a month per employee and restrict color pages to “customer-facing purposes.” Employees can spend no more than $15 a month on office supplies and are expected to reuse items such as box files. To save on electricity, mini-refrigerators “are not permitted moving forward” and staff should rely on appliances in common areas.”
In the 2013 Berkshire Hathaway annual report, Warren Buffett noted that the acquisition of H J Heinz could serve as a model for future buys.
“With the Heinz purchase we created a partnership template that may be used by Berkshire in future acquisitions of size,” said Buffett.
With the current addition of Canadian coffee icon Tim Hortons to the 3G portfolio for C$12.5 billion, we see that plans are currently underway to implement changes to the coffee chains executive ranks.
“3G will search the talent pools of the management teams of both companies and put together the best management team of the new company possible,” said Burger King CEO Daniel Schwartz at a press conference held earlier today.
Ken Harris, managing partner at Chicago-based Cadent Consulting Group, a marketing and sales consulting firm made up of highly experienced business leaders with line management backgrounds in consumer products says, “These guys will change consumer goods and food service forever and other CEOs know it. They are going to go in and streamline everything as fast as possible.”
When Tim Horton’s managers meet their new overlords at 3G, “They will have no idea what hit them,” added Harris.